Automated Salvage Transport v. Nv Koninklijke Knp

• Decision Date: 23 December 1999
• Docket Number: No. CIV.A. 96-369.,CIV.A. 96-369.
• Citation: 106 F.Supp.2d 606
• Parties: AUTOMATED SALVAGE TRANSPORT, INC., etc., et al., Plaintiffs, v. NV KONINKLIJKE KNP BT, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

106 F.Supp.2d 606

AUTOMATED SALVAGE TRANSPORT, INC., etc., et al., Plaintiffs, v. NV KONINKLIJKE KNP BT, et al., Defendants.

No. CIV.A. 96-369.

United States District Court, D. New Jersey.

December 23, 1999.

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Stephen L. Dreyfuss, Hellring, Lindeman, Goldstein & Siegal, Newark, NJ, Robert A. Weiner, Y. David Scharf, Barbra R. Funt, McDermott, Will & Emery, New York City, for Plaintiffs.

Benjamin P. Michel, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, David G. Keyko, Daniel Z. Mollin, Sheryl L. Reba, Winthrop, Stimson, Putnam & Roberts, New York City, for Defendants.

OPINION

WOLIN, District Judge.

This case is before the Court on the summary judgment motion of defendants NV Koninklijke KNP BT ("KNP") and KNP BT Paper Recycling BV ("KNP Recycling") (collectively "defendants" or "KNP defendants") to dismiss most counts of the Second Amended Complaint of the plaintiffs Automated Salvage Transport Inc. ("Automated Salvage"), Kruger Recycling Inc. ("Kruger Recycling"), Multi Material Management & Marketing ("EMS"), Newark Group Industries Inc. ("Newark Group"), Prins Recycling Corp. ("Prins Recycling"), United Paper Stock Co., Inc. ("United Paper") and Zozzaro Brothers, Inc. ("Zozzaro Brothers") (collectively, "plaintiffs") pursuant to Rule 56 of the Federal Rules of Civil Procedure. The Court has decided the matter pursuant to Rule 78 of the Federal Rules of Civil Procedure. For the reasons stated below, the defendants' motion will be granted in part and denied in part.

BACKGROUND

This case concerns the plaintiffs' allegations that to overcome a temporary drop in the profitability of "Old Newspaper," the defendants plotted to deflate the price of that paper by ordering and then refusing to accept "thousands of tons" of paper valued at millions of dollars. The plaintiffs assert that the scheme was accomplished through the defendants' use of a pulp broker, Nielsen & Nielsen, which the plaintiffs since have placed in Chapter 7 bankruptcy because the broker could not pay for the Old Newspaper (R. Nielsen Tr. at 88; A Nielsen Tr. at 64-65; Weiner Aff. Ex AQ), for which the plaintiffs now claim that the defendants are liable. The claims pertinent to this motion sound in breach of contract — primarily through an agency relationship — and fraud. Because this case is before the Court upon defendants' motion for summary judgment, the facts are related, predominantly, as they appear in plaintiffs' opposition papers. The Court, however, will highlight a few significant facts which defendants dispute.

I. The Parties

A. The Plaintiffs

All of the parties are United States suppliers of secondary paper fibers, commonly referred to as "recyclable waste paper."

Automated Salvage. Automated Salvage is a corporation organized under the laws of the State of Connecticut. It has its principal place of business in Kensington, Connecticut. (Mollin Aff., Ex. 1).

Kruger Recycling. Kruger Recycling is a corporation organized under the laws of the State of Delaware. It has its principal place of business in Albany, New York. (Id.).

EMS. EMS is a corporation organized under the laws of the State of California. Its principal place of business is in Oakland, California. (Id.).

Newark Group. Newark Group is a corporation organized under the laws of the State of New Jersey. Its principal place of business is in Cranford, New Jersey. (Id.).

Prins Recycling. Prins Recycling was a corporation organized under the laws of the State of Rhode Island. Its principal place of business was in Pawtucket, Rhode Island. (Id.).

Zozzaro Brothers. Zozzaro Brothers is a corporation organized under the laws of the State of New Jersey. Its principal place of business is in Clifton, New Jersey. (Id.).

B. KNP and Related Entities¹

KNP. KNP is a company organized under the law of the Netherlands with its principal place of business in the city of Amsterdam in the Netherlands. (Bonnier Decl. at ¶ 2). It is a holding company. (Id.). For the most part, it consists of three major "divisions" or "sectors": (1) KNP BT Distribution; (2) KNP BT Packaging ("KNP Packaging"); and (3) KNP Leykam (which focused on production of graphic paper). (Id.; Weiner Aff. Ex. I).

KNP Recycling. Defendant KNP Recycling is a subsidiary within the Solid Board Division of KNP Packaging ("KNP Packaging"). (Bonnier Decl. at ¶ 3). KNP Recycling supplies raw materials to the paper and board mills of operating companies within KNP and to paper and board mills that are unaffiliated with KNP. (Id.) Most, if not all, KNP Packaging mills use a grade of waste paper known as Old Newspaper ("ONP"). (Id.; Ver. Ex. BN). In 1994 and 1995, KNP Recycling supplied roughly sixty percent of the waste paper used by mills within KNP; other suppliers provided the remaining forty percent.² (Mollin Aff., Ex. 2).

Henk van Belle. Henk van Belle ("van Belle") worked for KNP Recycling. Primarily, he bought and sold recyclable waste paper. He, for the most part, bought waste paper from the trader, Nielsen & Nielsen (discussed below). The parties disagree as to whether he represented or worked for KNP, in addition to KNP Recycling. According to van Belle, he never held a position in any other companies in the KNP group, nor represented any of those companies. (van Belle Dep. at 4-8, 58, 97, 109). Plaintiffs, however, offer contrary evidence. They maintain that van Belle indicated that he represented KNP, in addition to KNP Recycling. (Meyerson Aff. at ¶ 6; Sparks Aff. at ¶ 10; B. Nielsen Tr. at 755-58, 877-78; Silverstein Aff. at ¶ 8; Soriano Tr. at 162, 728; Prins Aff. at ¶ 18; Zozzaro Aff. At ¶ 14; Klein Tr. at 163-64).

Bart van't Hul. Bart van't Hul ("van't Hul") worked at KNP Recycling. (van Belle Dep. at 7). Like van Belle, van't Hul bought and sold recyclable waste paper. He primarily bought paper from the trader, Pacific Forest Resources (discussed below).

Bep Nabuurs. Bep Nabuurs ("Nabuurs") was the general manager of KNP Recycling. He was the highest official at KNP Recycling. (Id.).

Henri Vermeulen. Henri Vermeulen ("Vermeulen") was KNP Recycling's commercial director. He was the second highest official at KNP Recycling. (Id.).

C. Non-parties

Nielsen & Nielsen. Non-party Nielsen & Nielsen ("N & N") was a California based trader of waste paper. According to defendants' evidence, it was in the business of buying paper, taking title to the paper, and reselling the paper at a mark-up. (Mollin Aff., Ex. 3). Plaintiffs, however, contend that N & N merely acted as the KNP defendants' purchasing agent with regards to the transactions at issue. (Nielsen Tr. at 806; Sparks Aff. § 24).

Bryan Nielsen. Bryan Nielsen ("Nielsen") was the Chief Financial Officer and Executive Vice President of N & N. He primarily worked in the international waste paper trade. (Mollin Aff., Ex. 3).

van Belle was Nielsen's contact person at KNP Recycling. (van Belle Dep. at 9). As discussed below, beginning in 1994, van Belle ordered or purchased American waste paper through N & N and Nielsen. (van Belle Dep. at 13).

Pacific Forest Resources and Victor Rice. Non-party Pacific Forest Resources ("Pacific Forest"), like N & N, was a waste paper trader. (Rice Dep. at 10). Since the 1980's, KNP Recycling³ purchased waste paper from Pacific Forest. (Id.) Victor Rice ("Rice"), Pacific Forest's Senior Vice President, dealt with van't Hul regarding the sale of ONP. (Id. at 7-8, 11-12).

II. Factual Record

In Automated Salvage Transport, Inc. v. NV Koninklijke KNP BT, No. Civ. A. 96-369, 1997 WL 576402 (D.N.J. Sept.12, 1997), the Court extensively discussed the Plaintiff's allegations. In brief, the claims pertinent to this motion consist of (1) breach of contract, (2) promissory estoppel, (3) breach of covenant of good faith and fair dealing, and (4) fraud. Significantly, the breach of contract claims hinge upon whether N & N acted as defendants' agent.

To avoid undue repetition with its prior opinion, the Court will briefly recount pertinent background information. First, the Court will set forth material portions of the plaintiffs' evidence. After that, the Court will discuss some portions of the defendants' evidence and the defendants' dispute with plaintiffs' evidence.

A. Plaintiffs' Factual Record⁴

During the early 1990's, Dutch paper companies, including KNP, experienced financial problems resulting from an increased cost in raw materials and a decline in selling prices. (Weiner Aff. Ex. E — KNP 1991 Report at 17). According to a KNP annual report, KNP companies "suffered considerably in 1994 from the explosive increase in waste paper prices." (Id. at 26).

In fall 1994, due to shortages of paper in Europe and the quality of paper in the United States, KNP Recycling sought to purchase more ONP from the United States. (Nabuurs Dep. at 36-37). Thus, in addition to its longstanding relationship with non-party Pacific Forest, KNP Recycling entered into a purchasing relationship with N & N which had contacts with many United States waste paper producers.⁵

In the spring of 1995, ONP prices were still extraordinarily high. (Moore Rpt. at 53-54). To reduce these prices, plaintiffs contend that the KNP defendants plotted to manipulate the waste paper market. Plaintiffs maintain that the KNP defendants believed that the market of waste paper, including ONP, was in a "delicate balance." As a result, the KNP defendants believed as little as 10,000 metric tons of additional demand could affect the price of waste paper. Plaintiffs allege that KNP schemed to order, but not pay for, substantial tonnage. Once ordered, the KNP defendants would not buy the waste paper. Hence, the price would fall when the false demand was lifted. At that time, the KNP defendants would purchase the waste paper at a lower price.⁶

As evidence of this scheme, plaintiffs point to a May 3, 1995, meeting of a KNP Policy group and KNP's subsequent actions. (Vermeulen Ex. BN). Vermeulen and many...